GENERAL PROVISIONS 3. Object / prestation – subject matter of the obligation.

Conduct
required to be observed by the debtor. Consists in giving, doing,
and not doing.
ARTICLE 1156. An obligation is a juridical necessity to give, to do or not to
do. (n) 4. Juridical tie – efficient cause. That which binds the parties to the
obligation. It can be determined by knowing the source of the
obligation.
DEFINITION
- Derived from the Latin word “obligatio” = tying or binding FORM OF OBLIGATION
- It is a tie of law or a juridical bond where one is bound in favor of another - General Rule: no legal requirement for the form of obligations arising
to render something – which may consist in giving a thing, doing, or not from contracts.
doing an act
- Obligations arising from other sources do not have a form at
- Manresa definition
o A legal relation established between one party and another, whereby the
latter is bound to the fulfillment of a prestation which the former may all. OBLIGATION v. RIGHT v. WRONG
demand of him. Obligation Right Wrong
- Art. 1156 is the passive definition of obligation in that the law stresses The act or The power which a An act or omission of
the duty of the debtor or obligor only. performance which the person has under the one party in violation
- Nature of obligations in the Civil Code law will enforce. law, to demand from of the legal right or
o These are civil obligations, which gives to the creditor or oblige a right another any rights of another,
of action in courts to enforce their performance. prestation. causing injury to the
o As opposed to a natural obligation, which is based on equity and natural latter.
law. It does not grant a right of action for the obligation’s enforcement ELEMENTS OF A CAUSE OF ACTION
but in case of voluntary fulfillment, the latter may not recover what he
1. Legal right in favor of a person by whatever means and under whatever
has delivered.
law it arises or is created
2. A correlative legal obligation on the part of another to respect or not
JURIDICAL NECESSITY to violate said right
- Obligation is a juridical necessity because in case of non-compliance, the 3. An act or omission in breach or violation of said right by the
courts may be called to enforce its fulfillment. defendant with consequential injury or damage to the plaintiff for
- The debtor must comply with his obligation whether he likes it or not. His which he may maintain an action for the recovery of damages.
failure will lead to legal consequences.
- If an obligation cannot be enforced, it may be only a natural obligation. - If any of the elements are absent, the complaint becomes vulnerable to
a motion to dismiss for the failure to state a cause of action.
REQUISITES OF AN OBLIGATION - The cause of action only arises upon the happening of the third requisite.
1. Passive subject – debtor / obligor. Person who is bound to the - Right of action
fulfillment of the obligation. He who was a duty. o Right to commence and maintain an action
2. Active subject – creditor / obligee. Person who is entitled to demand o Depends on substantive law, as opposed to cause of action, which is
the fulfillment of the obligation. He who has a right. remedial.
o Springs from a cause of action but does not accrue until all the requisites
of cause of action have occurred.
DAMAGE v. INJURY v. DAMAGES GENERALLY
Damage Injury Damages - Exclusive. No obligation may arise if it does not come from the enumeration.
Lost, hurt, or harm Illegal invasion of a Denote the sum of
which results from the legal right; wrongful money recoverable as SOURCES
injury act which causes harm amends for the 1. Law – when the obligation is enforced by the law itself
to another wrongful act or
2. Contracts – when the obligation arises from the stipulation of the
omission
parties (Art. 14306 NCC).
3. Quasi-contracts – when the obligation arises from lawful, voluntary,
- There may be injury without damage and damage without injury and unilateral acts and which are enforceable to the end that no one
- Injury without damage shall be unjustly enriched or benefited at the expense of another (Art.
o Something wrongful and illegal was done but there was no resulting 2154 NCC).
damage i.e. slap to the face. 4. Crimes / acts or omissions punished by law – when the obligation
- Damage without injury arises from civil liability, the consequence of a criminal offense (Art. 1161
NCC).
o Something wrongful but legal was done as when one exercises his
right but such exercise results in the damage on the part of another 5. Quasi-delicts / torts – when the obligation arises from damage caused
i.e. a confiscated land was sold via public auction. B bought it. The to another through an act or omission, there being fault or negligence,
owner exercised his right to question the validity of the confiscation. As a but no contractual relation exists between the parties (Art. 2176
result, the delivery of the land to B was delayed. The owner exercised NCC).
his right resulting to damage to buyer B.
CLASSIFICATIONS
KINDS OF OBLIGATION ACCORDING TO SUBJECT MATTER 1. Obligations arising from law
1. Real Obligation – obligation to give; the object is a thing which the 2. Obligations arising from private acts where the law merely recognizes
obligor must deliver to the obligee. the existence of the obligations
2. Personal Obligation – obligation to do or not to do; the prestation is a. Licit acts i.e. contracts and quasi-contracts
an act to be done or not to be done. b. Illicit acts i.e. delicts and quasi-delicts
a. Positive personal obligation – obligation to do or to
render some service ARTICLE 1158. Obligations derived from law are not presumed. Only
b. Negative personal obligation – obligation not to do / not those expressly determined in this Code or in special laws are demandable,
to give and shall be regulated by the precepts of the law which establishes them; and
as to what has not been foreseen, by the provisions of this Book. (1090)
ARTICLE 1157. Obligations arise from:
(1) Law; GENERALLY
(2) Contracts; - Refers to legal obligations or those arising from law.
(3) Quasi-contracts; - Burden of proof that an obligation is derived from law falls on the obligor.
(4) Acts or omissions punished by law; and - Can only be demandable if found in:
(5) Quasi-delicts. (1089a) 1. Civil Code
2. Special Laws – all other laws not contained in the Civil Code (Art.
1158 NCC).
 1. Consent
ARTICLE 1159. Obligations arising from contracts have the force of 2. Object
law between the contracting parties and should be complied with in good 3. Causa
faith. (1091a) - Must not be contrary to (Art. 1306 NCC):
1. Law
GENERALLY
2. Morals
- Refers to contractual obligations or obligations arising from voluntary
3. Good customs
agreements.
4. Public order
5. Public policy
CONTRACT
- A void contract does not exist. It creates no obligations.
- Meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service (Art. 1305)
GOVERNMENT APPROVAL
BINDING FORCE - Can only be binding on the parties once the contract has been approved by
the government.
- Obligations are primarily governed by the agreement of the parties.
- Have the force of law between the parties once perfected.
GOOD FAITH
- Parties are bound to comply in good faith.
- Means compliance in accordance with the stipulations or terms of the
- They need each other’s consent before they can renege from the contract.
contract or agreement.
- Right of relief of one party against a non-complying party requires:
o Proof of contract
BREACH OF CONTRACT
o Proof of failure to perform
- No party cannot breach a contract with impunity even though the
- In case of defect, alleging party must prove the defect by convincing contract does not impose sanctions.
evidence prior to the invalidation of the contract.
- Philippine law provides that actionable injury is inherent in every breach
- Every provision of law regulating contracts must be deemed included in the of contract.
contractual agreement because contracts are not superior to law
- Courts may impose interests on damages awarded to the plaintiff.
although the former have the effect of the latter.
- On a demand of one party for performance of the contract by the other
- Compromise agreement
party:
o Immediately executory
o Failure of a party to demand performance for an unreasonable length
o Non-appealable except for reasons of: of time will render the contract ineffective even if the contract does
1. Vices of consent not provide for a specific period.
2. Forgery o Failure of a party to respond to a demand letter is not an implied
o Has the effect and authority of res judicata admission of liability.
o May either be extrajudicial or judicial
PRESERVATION OF INTEREST OF PROMISEE
REQUIREMENTS OF A VALID CONTRACT - A breach of contract confers upon the plaintiff a cause of action to
- All essential elements are present recover what has been lost.
- A breach of contract creates a new duty i.e. to make recompense to the entered into a contract to prevent
plaintiff. injustice.

CASES
GOVERNED BY
- An oral agreement inconsistent with a prior written agreement is binding.
1. Articles 2142-2175, Chapter I, Title XVII NCC
- A contract stipulating that in case of failure of debtor to pay amount of
loan, his property shall be considered sold to creditor is valid and
binding. CASES
- Courts have the power to ignore a contract stipulating unreasonable - A quasi-contract cannot emerge as against one party when the subject
attorney’s fees and may itself determine the appropriate amount to be paid. matter thereof is already covered by an existing contract with another.
- Corporations cannot argue for equity in a litigation about their act of - When both parties are negligent in the performance of their obligations. The
breaching a contract. fault of one cancels the other. Their rights and obligations may be equitably
- If a corporation unconditionally undertook to redeem preferred shares at determined by the court.
specified dates and then argues that it can no longer perform such - Taxes paid by mistake may be recovered.
obligation due to financial problems, the same corporation is liable for
breach of contract for its unconditional undertaking does not depend on KINDS
its financial ability.
Negotiorum gestio Solutio indebiti
Voluntary management of the Juridical relation which is created
property or affairs of another when something is received when
ARTICLE 1160. Obligations derived from quasi-contracts shall be subject to without the knowledge or consent there is no right to demand it and it
the provisions of Chapter 1, Title XVII, of this Book. (n) of the latter (Art. 2144 NCC). was unduly delivered through
mistake (Art. 2154 NCC).
GENERALLY Does not arise when: Based on the principle of unjust
- Refers to obligations arising from quasi-contracts. enrichment whereby no one shall
1. The property / business is not
abandoned unjustly enrich himself at the
QUASI-CONTRACT 2. The manager has been tacitly expense of another.
- That juridical relation resulting from certain lawful, voluntary and authorized by the owner
unilateral acts by virtue of which the parties become bound to each other Applies when:
to the end that no one will be unjustly enriched or benefited at the
expense of another (Art. 2142 NCC). 1. Payment is made where there is
no duty to pay by the payor and the
payee has no right to receive such
CONTRACT v. QUASI-CONTRACT payment
2. Payment is made due to
Contract Quasi-contract mistake and not due to liberality

There is meeting of the minds / There is no meeting of the minds /

consent. consent.
Parties deliberately entered into an The consent of the parties is supplied
agreement. by fiction of law, which means that
the law considers them as having
 ARTICLE 1161. Civil obligations arising from criminal offenses shall and the city or municipality shall be subsidiarily responsible therefor.
be governed by the penal laws, subject to the provisions of article 2177, The civil action herein recognized shall be independent of any
and of the pertinent provisions of Chapter 2, Preliminary Title, on Human criminal proceedings, and a preponderance of evidence shall suffice
Relations, and of Title XVIII of this Book, regulating damages. (1092a) to support such action.
4. ARTICLE 2176. Whoever by act or omission causes damage to another,
GENERALLY there being fault or negligence, is obliged to pay for the damage
- Refers to civil liability arising from crimes / delicts. done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed
- Crime produces two effects
by the provisions of this Chapter. (1902a)
o Moral evil. On the public because it breaches the social order
o Material damage. On the private victim because it causes personal
SCOPE OF CIVIL LIABILITY
sufferings
- Governed by:
- If there is no material damage, the offender is not civilly liable.
1. Revised Penal Code and Special Penal Laws subject to the provision of
- Every person criminally liable is also civilly liable (Art. 100 RPC).
Art. 2177 NCC
- A person not criminally liable may be civilly liable (Art. 29, Rule 111,
2. Chapter 2, Preliminary Title, NCC on Human Relations
ROC).
3. Title XVIII NCC on Damages
- Supreme Court may modify decision on appeal to add civil liability if the
lower court did not include the same. - Inclusions (Art. 104 RPC):
1. Restitution of the thing lost
ON A CIVIL ACTION 2. Reparation of the damage caused
- General Rule: civil action is deemed instituted in a criminal action. 3. Indemnification for consequential damages
- Exceptions
1. Offended party waives the civil action
2. Offended party reserves the right to institute it separately ARTICLE 1162. Obligations derived from quasi-delicts shall be governed by
the provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a)
3. Offended party institutes the civil action prior to the criminal action
- There is no need to reserve the right to file an independent civil action
for because these may be prosecuted separately even without a GENERALLY
reservation: - Refers to obligations arising from quasi-delicts / torts / culpa aquiliana
1. ARTICLE 32. Any public officer or employee, or any private - Includes:
individual, who directly or indirectly obstructs, defeats, violates or in 1. Injury to persons
any manner impedes or impairs any of the [constitutional] rights and 2. Damage to property
liberties of another person shall be liable to the latter for damages. - Coverage:
1. Acts criminal in character whether intentional or negligent
2. ARTICLE 33. In cases of defamation, fraud, and physical injuries, a civil
2. Acts punishable by law
action for damages, entirely separate and distinct from the criminal
- No reservation of the right to file an independent civil action based on quasi-
action, may be brought by the injured party. Such civil action shall
delict need be made in the criminal case
proceed independently of the criminal prosecution, and shall require
- The offended party cannot recover damages twice for the same act or
only a preponderance of evidence.
omission or under both delict and quasi-delict. Since these two (2) civil
3. ARTICLE 34. When a member of a city or municipal police force refuses
or fails to render aid or protection to any person in case of danger to
life or property, such peace officer shall be primarily liable for damages,
 liabilities are distinct and independent of each other, the failure to recover
in one will not necessarily preclude recovery in the other.

GOVERNED BY
1. Chapter 2, Title XVII NCC
2. Special Laws

QUASI-DELICT
- ARTICLE 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter. (1902a)

REQUISITES
1. Act or omission by the defendant
2. Fault or negligence of the defendant
3. Damage caused to the plaintiff
4. Direct causal relation between the act or omission and the damage
5. No pre-existing contractual relation exists between the parties

CRIME v. QUASI-DELICT
Crime Quasi-delict
Criminal intent or criminal negligence Negligence
Affects public interest Affects private interest
Two liabilities: criminal and civil Only civil liability
Purpose is punishment Purpose is indemnification of the
offended party
Cannot be settled by the parties Can be settled by the parties
themselves themselves
Quantum of proof is beyond Quantum of proof is preponderance
reasonable doubt of evidence (
The liability of the person The liability of the person
responsible for the author of the responsible for the author of the
negligent act or omission is negligent act or omission is direct
subsidiary. and primary.
 NATURE AND EFFECT OF OBLIGATIONS - General Rule: Diligence of a good father of a family
o Applies to real obligations (obligations to give)
o A.K.A ordinary care / diligence which an average prudent person
ARTICLE 1163. Every person obliged to give something is also obliged to exercises over his own property
take care of it with the proper diligence of a good father of a family, unless - Exceptions: if the law or the stipulation of the parties provide for another
the law or the stipulation of the parties requires another standard of care. standard
(1094a) - Factors to be considered for the diligence required (Art. 1173 NCC):
GENERALLY 1. Nature of the obligation
- Refers to an obligation to give a specific or determinate thing. 2. Corresponds with the circumstance of the person, time, and place
- Parties cannot stipulate for absolute exemption from liability for any fault
or negligence for that contract is contrary to public policy. DUTIES OF DEBTOR IN OBLIGATION TO GIVE AN INDETERMINATE THING
- Debtor’s obligation is extinguished if the specific / determinate thing is 1. To deliver a thing which is of the quality intended by the parties taking
lost into consideration the purpose of the obligation and other circumstances
due to force majeure (Art. 1174 NCC). (Art. 1246 NCC)
2. To be liable for damages in case of fraud, negligence, or delay, in the
DEFINITION performance of his obligation, or contravention of the tenor thereof
- A thing is said to be specific or determinate when it is particularly (Art. 1170 NCC)
designated or physically segregated from all others of the same class
(Art. 1459 NCC).
- A thing is generic or indeterminate when it refers only to a class or ARTICLE 1164. The creditor has a right to the fruits of the thing from the time
genus to which it pertains and cannot be pointed out with particularity the obligation to deliver it arises. However, he shall acquire no real right over
it until the same has been delivered to him. (1095)
SPECIFIC / DETERMINATE v. GENERIC / INDETERMINATE
Specific / Determinate Generic / Indeterminate GENERALLY
Identified by its individuality. Identified by its specie. - The creditor is entitled to the fruits of the thing to be delivered from the
time the obligation to make delivery of the thing arises. Thus, when there
Debtor cannot substitute it with Debtor can give anything of the same has been no delivery yet, the proper action of the creditor is not one for
another without the consent of the class as long as it is of the same kind. recovery of possession and ownership but one for specific performance
creditor. or rescission of the obligation
- In case of rescission, the parties are under “obligation to return the
DUTIES OF DEBTOR IN OBLIGATION TO GIVE A DETERMINATE THING things which were the object of the contract, together with their fruits and
the price with its interest.’’ (Art. 1385 NCC)
1. To preserve or take care of the thing due
2. To deliver the fruits of the thing (Art. 1164 NCC)
3. To deliver its accessions and accessories (Art. 1166 NCC) KINDS OF FRUITS
4. To deliver the thing itself 1. Natural – products of the soil, young, and other animals
5. To answer for damages in case of non-fulfillment or breach (Art. 1170 2. Industrial – produced by lands of any kind or products of lands
NCC) through cultivation or labor
3. Civil – derived due to juridical relation
OBLIGATION TO TAKE CARE OF THE THING DUE
WHEN OBLIGATION TO DELIVER ARISES ARTICLE 1165. When what is to be delivered is a determinate thing,
1. From the time of the perfection of the contract / meeting of the minds the creditor, in addition to the right granted him by article 1170, may compel
2. If subject to a suspensive condition or period, when that condition or the debtor to make the delivery.
period arrives
a. Parties may still make a separate stipulation as to the fruits of the If the thing is indeterminate or generic, he may ask that the obligation be
thing to be delivered complied with at the expense of the debtor.
3. In a contract of sale, obligation arises upon the perfection of the contract
even if there is a suspensive condition or period
4. In obligations to give arising from law, quasi-contracts, delicts, and quasi- If the obligor delays, or has promised to deliver the same thing to two or more
delicts, the time of performance is determined by the applicable persons who do not have the same interest, he shall be responsible for
provisions of law any fortuitous event until he has effected the delivery. (1096)

PERSONAL RIGHT CLASSIFICATIONS OF OBLIGATIONS

- Right or power of a person (creditor) to demand from another (debtor), as 1. Real – to give a specific or generic thing
a definite passive subject, the fulfillment of the latter’s obligation to give, 2. Personal – to do or not to do
to do, or not to do.
REMEDIES FOR CREDITORS IN REAL OBLIGATION
REAL RIGHT 1. Specific real obligation
a. Demand specific performance or fulfillment with a right to
- Right or interest of a person over a specific thing (like ownership,
indemnity for damages
possession, mortgage, lease record) without a definite passive subject
b. Demand rescission or cancellation with a right to recover damages
against whom the right may be personally enforced
c. Demand the payment of damages only where it is the only feasible
remedy
PERSONAL RIGHT v. REAL RIGHT
Personal Right Real Right - The very thing itself must be delivered.
- Only the debtor can comply with the obligation
There are definitive active and There is only a definitive active - Creditor cannot use force or violence. He must bring the matter to court
passive subjects. subject who will order the delivery.
Enforceable against a particular Enforceable against the whole world
person 2. Generic real obligation
a. Ask the debtor to perform the obligation with a right to recover
The active subject does not become the owner of the thing due unless it has
damages in case of breach
been delivered to him.
- Can be performed by a third person
- Not necessary for creditor to compel the debtor to make the delivery
KINDSD OF DELIVERY
1. Actual – the property changes hands physically ON DEBT
2. Constructive – physical transfer is implied - Constitution prohibits imprisonment for non-payment of debts purely civil
in nature or those arising from contracts.
- Subsidiary imprisonment may be imposed for non-payment of civil liability
in a criminal case.
 - General Rule: all accessions and accessories are considered included in the
DELAY AND BAD FAITH ON THE DELIVERY OF A SPECIFIC THING obligation to deliver a determinate thing although they may not have
- General Rule: loss of specific thing to be delivered due to fortuitous been mentioned
event o Principle: the accessory follows the principal
extinguishes the debtor’s obligations o Exception: stipulation by the parties to the contrary
- Exceptions: - General Rule: an obligation to deliver the accessions or accessories of a
1. Unreasonable delay thing does not include the latter
2. Bad faith / when the debtor promises delivery to separate creditors with o Exception: stipulation by the parties to the contrary
no common interest
- Note that loss of an indeterminate thing due to fortuitous event does not
extinguish the debtor’s obligation.
ARTICLE 1166. The obligation to give a determinate thing includes that of

delivering all its accessions and accessories, even though they may not have
ARTICLE 1167. If a person obliged to do something fails to do it, the same
shall be executed at his cost.

This same rule shall be observed if he does it in contravention of the tenor of

the obligation. Furthermore, it may be decreed that what has been poorly
done be undone. (1098)
GENERALLY
- Accessions are not necessary to the principal thing but the accessory and RIGHT OF CREDITOR TO ACCESSIONS AND ACCESSORIES
the principal thing must go together.
- Both accessions and accessories can exist only in relation to the principal.

ACCESSIONS
- Fruits of, or additions to, or improvements upon, a thing (the principal)
- Includes
1. Accession [artificial] in building, planting, and sowing
2. Accession natural in alluvion, avulsion, change of course of rivers,
and formation of islands
- As a right
o May be defined as the right pertaining to the owner of a thing over its
products and whatever is incorporated or attached thereto, either
naturally or artificially.
o Includes the right to the fruits and the accessories.

ACCESSORIES
- Things joined to, or included with, the principal thing for the latter’s
embellishment, better use, or completion
GENERALLY
- Refers to an obligation to do
- General Rule: may be performed by a third person
o Exception: if the determining motive is the personal qualifications of
the debtor, the obligation cannot be done by another. Thus, creditor
may be indemnified for damages except if the obligation can still be
performed at the expense of the debtor, then court is not authorized to
merely grant damages to the creditor.
- Specific performance cannot be ordered in a positive personal
obligation because it may amount to involuntary servitude

TYPES OF PERSONAL OBLIGATIONS

1. Positive / affirmative – to do
2. Negative – not to do

SITUATIONS CONTEMPLATED IN THE PROVISION

1. Debtor fails to perform an obligation to do
2. Debtor performs an obligation to do but contrary to the terms thereof
3. Debtor performs an obligation to do but in a poor

manner REMEDIES OF CREDITOR IN POSITIVE PERSONAL

OBLIGATION
 1. If the debtor fails to perform is to be rendered was a controlling motive for the establishment of the contract;
a. To have the obligation performed by the debtor, or by another unless or
personal considerations are involved, at the debtor’s expense
b. To recover damages (3) When demand would be useless, as when the obligor has rendered it
2. If the debtor performs contrary to the terms beyond his power to perform.
a. To have the court order the debtor to undo what was done if still
possible
3. If the debtor performs in a poor manner In reciprocal obligations, neither party incurs in delay if the other does
a. To have the court order the debtor to undo what was done if still not comply or is not ready to comply in a proper manner with what is
possible incumbent upon him. From the moment one of the parties fulfills his
obligation, delay by the other begins. (1100a)

ARTICLE 1168. When the obligation consists in not doing, and the obligor GENERALLY
does what has been forbidden him, it shall also be undone at his expense.
(1099a) - There is no delay if the obligation is not yet due or demandable and
liquidated.
o A debt is liquidated when the amount is known or is determinable by
GENERALLY inspection of the terms of relevant documents.
- Refers to negative personal obligation where the debtor is obliged not to o Failure to furnish a debtor a detailed statement of account does not
do an act. ipso facto result in an unliquidated obligation.
- There is no specific performance for the obligation is fulfilled in not doing. - Demand is not merely notifying or reminding.
- No debtor can be delayed in this kind of obligation. - The creditor has the burden of proving that demand has been made. If there
is no demand, the law assumes that an extension has been given.
REMEDIES OF CREDITOR IN NEGATIVE PERSONAL OBLIGATION - Default arises on the day the demand was made and was not complied with
1. Debtor undoes what was done by the debtor.
- In the absence of evidence of an extra-judicial demand, the effects of default
2. If not possible, action for damages
arise from the date of the judicial demand / filing of complaint.
o An extrajudicial demand is not required before a judicial demand.
- The debtor may relieve himself from liability if he proves that the delay
ARTICLE 1169. Those obliged to deliver or to do something incur in delay was not his fault.
from the time the obligee judicially or extrajudicially demands from them
the fulfillment of their obligation. DELAY
1. Ordinary delay – failure to perform an obligation on time
However, the demand by the creditor shall not be necessary in order that 2. Legal delay / default / mora – failure to perform an obligation on
delay may exist: time constituting a breach of the obligation

(1) When the obligation or the law expressly so declare; or KINDS OF DELAY
1. Mora solvendi - delay on the part of the debtor to fulfill his obligation
(2) When from the nature and the circumstances of the obligation it appears (to give or to do) by reason of a cause imputable to him
that the designation of the time when the thing is to be delivered or the 2. Mora accipiendi - delay on the part of the creditor without justifiable
service reason to accept the performance of the obligation
 3. Compensatio morae - delay of the obligors in reciprocal obligations. The 4. Where the obligation is to pay money, the debtor is not liable for interest
delay of the obligor cancels out the effects of the delay of the obligee from the time of the creditor’s delay
and vice versa. 5. The debtor may release himself from the obligation by the
consignation of the thing or sum due.
REQUISITES OF MORA SOLVENDI - Compensatio morae
1. Failure of the debtor to perform on the date agreed upon 1. No delay
2. Judicial or extrajudicial demand made by the creditor upon the debtor 2. If the delay of one party is followed by that of the other, the liability of
3. Failure of the debtor to comply with such demand the first infractor shall be equitably tempered or balanced by the
courts. If it cannot be determined which of the parties is guilty of
delay, the contract shall be deemed extinguished and each shall bear
CASES his own damages (Art. 1192 NCC).
- S obliged himself to deliver to B a specific refrigerator on December 10.
If S does not deliver the refrigerator on December 10, he is only in
WHEN DEMAND NOT NECESSARY TO PUT DEBTOR IN DELAY
ordinary delay in the absence of any demand from B although a period
has been fixed for the fulfillment of the obligation. - General Rule: delay begins from the moment demand is made judicially or
o The law presumes that B is giving S an extension of time. Hence, there is extrajudicially for the fulfillment of the obligation.
no breach of the obligation and S is not liable for damages. - Exceptions:
o If a demand is made upon S by B on December 15 and S fails to 1. When the obligation so provides
deliver the refrigerator, S is considered in default only from the date. a. The obligation must state that demand is not necessary.
o If an action for specific performance is filed by B on December 20, the b. “The debtor will be in default” or “I will be liable for damages.”
payment of damages for the default must commence on December 2. When the law so provides
15 when he made the extra-judicial demand and not on December 3. When time is of the essence
20. a. When the time of delivery is not fixed or is stated in general and
o In the absence of evidence as to such extra-judicial demand, the effects indefinite terms, time is not of the essence.
of default arise from the date of the judicial demand, that is, from the b. As such, the delivery must be made within a reasonable time, in
fi ling of the complaint. the absence of anything to show that an immediate delivery was
intended.
c. It is not necessary for the contract to categorically state that time is
EFFECTS OF DELAY
of the essence; intent is sufficient.
- Mora solvendi 4. When demand would be useless
1. Debtor is guilty of breach of the obligation a. When a specific thing is lost to fortuitous event
2. Debtor is liable for interest in case of obligations to pay money or b. When debtor refuses to comply with the obligation
damages in other obligations 5. When there is performance by a party in reciprocal obligations
a. Interest shall start from the filing of the complaint. a. The performance of one is conditioned upon the simultaneous
3. Debtor is liable even in a fortuitous event for delivery of a determinate fulfillment on the part of the other
thing b. From the moment a party in reciprocal obligations fulfills or is
a. Except if the debtor can prove that the loss would have resulted ready to fulfill his obligation, delay by the other begins.
just the same even if he had not been in default, the court may
equitably mitigate the damages
- Mora accipiendi WHEN IS TIME OF THE ESSENCE
1. Creditor is guilty of breach of obligation - Factors to consider:
2. Creditor is liable for damages suffered by the debtor 1. Nature of the contract
3. Creditor bears the risk of losing the thing due 2. Subject matter
 3. Circumstances under which the contract is made o It is not causal fraud, which is fraud employed in the execution of a
- Examples: contract that vitiates consent and makes the contract voidable
1. In agreements which are executed in the form of options, time is - This is termed as civil fraud which gives rise to civil liability. This is not
always held to be of the essence of the contract and acceptance of criminal fraud which gives rise to criminal liability.
the option and payment of the purchase price constitute conditions
precedent to specific performance.
2. Unilateral contracts NEGLIGENCE
3. mercantile contracts for the manufacture and sale of goods - Any voluntary act or omission, there being no malice, which prevents the
4. Where the subject matter of a contract is of speculative or fluctuating normal fulfillment of an obligation.
value, it is held that the parties must have intended time to be of the
essence. DELAY
5. Where the contract relates to mining property which requires the - Delay must either be malicious or negligent. Mere inadvertence is not
parties to be vigilant in asserting their right. enough.
o Where the omission of the buyer to sign a check, one of 24 post
dated checks which were delivered to the seller who did not bother to
ARTICLE 1170. Those who in the performance of their obligations are guilty call the buyer to ask him to sign the check, was mere “inadvertence’’
of fraud, negligence, or delay, and those who in any manner contravene the on the part of the buyer, the latter was held not liable for damages
tenor thereof, are liable for damages. (1101) resulting from the delay in the payment of the value of the unsigned
check.
GENERALLY
- Gives the grounds for liability to entitle the plaintiff to recover damages. CONTRAVENTION
- Contemplates that the obligation was performed but the obligor is guilty - Violation of the terms and conditions of the obligation.
of breach thereof. - Must not be due to force majeure
- Applies to all kinds of voluntary obligations - Example: unilateral act of terminating the contract without informing the
other party.
GROUNDS
1. Fraud BREACH OF CONTRACT
2. Negligence - Failure without justifiable excuse to comply with the terms of a contract.
3. Delay - May be willful or done unintentionally.
4. Contravenes the tenor of the - Failure, without legal excuse, to perform any promise which forms the
obligation FRAUD whole or part of the contract.
- Deceit or dolo
- Deliberate or intentional evasion of the normal fulfillment of an obligation RECOVERY OF DAMAGES
- Implies malice or dishonesty - Measure of recoverable damages shall be governed by Title XVIII on
- Does not cover mistake or errors of judgement made in good faith. Damages NCC.
- Bad faith in that it is designed to mislead or deceive another. - One injured by a breach of a contract, or by a wrongful or negligent act
- Refers to incidental fraud committed in the performance of an obligation or omission shall have a fair and just compensation commensurate to the
already existing because of contract. loss sustained as a consequence of the defendant’s act.
- The remedy of recovering damages serves to preserve the following
interests of the promise
1. Expectation interest – interest in having the benefit of his bargain
 2. Reliance interest – interest in being reimbursed for loss caused
If negligence shows bad faith or it is so gross that it amounts to malice or
by reliance on the contract
wanton attitude, the rules on fraud shall apply and no more distinction exists
3. Restitution interest – interest in having restored to him any benefit
between the two.
that he has conferred on the other party.
- Proof needed by the plaintiff:
1. Existence of the obligation - Gross negligence: characterized by intentional and willful want or
2. Existence of the failure to perform it absence of or failure to exercise even slight care or diligence
- Defense for the defendant:
1. Proof of exercise of his due diligence
2. Proof of fortuitous event
ARTICLE 1171. Responsibility arising from fraud is demandable in all
- The obligee has the duty to minimize the damages for which he intends
obligations. Any waiver of an action for future fraud is void. (1102a)
to hold any obligor responsible. Thus, he cannot recover damages for
any loss which he might have avoided with ordinary care.
GENERALLY
DAMAGES RECOVERABLE WHERE THE OBLIGATION IS TO PAY MONEY - Refers to incidental fraud employed in the fulfillment of an obligation.
- Courts cannot mitigate or reduce the damages to be awarded because fraud
- Art. 1170 only talks about the obligation to do something other than the
is serious and evil.
payment of money.
o Art. 2209 governs when the debtor failed to make payment of money.
- Rates of penalty interest: WAIVER
o Stipulation - Waiver of future fraud is void.
o Rate equal to the regular monetary interest - Waiver of past fraud is valid as an act of generosity and magnanimity on the
o Legal interest (6%) part of the injured party.
- Usury Law o Once this waiver is effected, the injured party renounces the effect of the
o The rate of interest for the loan or forbearance of any money, goods fraud, which is the right to indemnity.
or credits and the rate allowed in judgments, in the absence of
express contract as to such rate of interest, shall be 12% per annum.
ARTICLE 1172. Responsibility arising from negligence in the performance of
FRAUD v. NEGLIGENCE every kind of obligation is also demandable, but such liability may be regulated
Fraud Negligence by the courts, according to the circumstances. (1103)
Deliberate intention to cause No intention
damage GENERALLY
Waiver for future fraud is void. Allowed - Courts have a wide discretion in fixing the measure of damages because
negligence is a question which must depend upon the circumstances of
Must be clearly proven Preponderance of evidence is each case.
enough for negligence is presumed - If both parties are mutually negligent, the fault of one cancels the other.
from the mere breach of the - In negligence cases, the aggrieved party may choose between a
contractual obligation. criminal action under Article 100 of the Revised Penal Code or a civil
Liability cannot be mitigated by Can be mitigated according to the action for damages under Article 2176 of the Civil Code. What is
courts. circumstances prohibited under Article 2177 of the Civil Code is to recover twice for the
same negligent act.
WAIVER PRESUMPTION OF CONTRACTURAL NEGLIGENCE
- Waiver of future fraud is valid. Exceptions: 1. In tort cases, negligence should be clearly established since it is the
1. Nature of the obligation requires the exercise of extraordinary diligence basis of the action.
2. If the fraud committed shows bad faith which makes it equivalent to 2. In breach of contract cases, the action need only prove:
fraud. a. Existence of contract
b. Fact that the obligor failed to comply with the contract
KINDS OF NEGLIGENCE ACCORDING TO SOURCE OF OBLIGATION
1. Contractual (culpa contractual) – not a source of obligation; merely makes
the debtor liable for damages in view of his negligence in the ARTICLE 1173. The fault or negligence of the obligor consists in the omission
fulfillment of a pre-existing obligation resulting in its breach; does not of that diligence which is required by the nature of the obligation and
amount to a crime. corresponds with the circumstances of the persons, of the time and of the place.
2. Civil (culpa aquiliana) – source of an obligation between the parties When negligence shows bad faith, the provisions of articles 1171 and
not formally bound before by any pre-existing contract; quasi-delict 2201, paragraph 2, shall apply.

- However, a pre-existing contractual relation between the parties If the law or contract does not state the diligence which is to be observed
does not preclude the existence of culpa aquiliana. This rule in the performance, that which is expected of a good father of a family shall
governs only where the act or omission complained of would constitute be required. (1104a)
an actionable tort independently of the contract.

3. Criminal (culpa criminal) – results in the commission of a crime. GENERALLY

- This provision defines fault or negligence.
- Test to determine negligence
CULPA CONTRACTUAL v. CULPA AQUILIANA
o Reasonable care and caution expected of an ordinary prudent person i.e.
Culpa contractual Culpa aquiliana would a prudent man foresee harm as a consequence of the act to be
Liability arises from a breach of Liability arises from mere tort done?
positive obligation o Generally, there is no hard and fast rule for measuring degree of care.
Defense of a good father of a family Diligence of a good father of a
will only mitigate damages. family is a complete defense. FACTORS
1. Nature of the obligation
2. Circumstances of the person
NEGLIGENCE ON THE PART OF THE INJURED PARTY 3. Circumstances of time
- Art. 2179 NCC. When the plaintiff’s own negligence was the immediate and 4. Circumstances of the place
proximate cause of his injury, he cannot recover damages. But if his
negligence was only contributory, the immediate and proximate cause of the MEASURE OF LIABILITY FOR DAMAGES
injury being the defendant’s lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded. Art. In contracts and quasi-contracts, the damages for which the
- If proximate cause, no right to recover damages. If only contributory, 2201 obligor who acted in good faith is liable shall be those that are the
may recover damages but it shall be mitigated. natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have
reasonably foreseen
at the time the obligation was constituted. In case of fraud, bad faith,
DILIGENCE malice or wanton attitude, the obligor shall be responsible for all
damages
- Attention and carewhich may
required of abeperson
reasonably attributed
in a given to and
situation theis non-
the opposite of negligence.
performance of the obligation. - Kinds
Art. Willful injury to property may be a legal ground for awarding o That agreed upon by the parties, orally or in writing
2220 moral damages if the court should find that, under the o Required by law in the absence of stipulation
circumstances, such damages are justly due. The same rule o If both are silent, then the diligence expected of a good father of a
applies to breaches of contract where the defendant acted family or ordinary diligence
fraudulently or in bad faith.
Art. In contracts and quasi-contracts, the court may award exemplary
2232 damages if the defendant acted in a wanton, fraudulent, reckless, ARTICLE 1174. Except in cases expressly specified by the law, or when it
oppressive, or malevolent manner. is otherwise declared by stipulation, or when the nature of the obligation
Art. Any person who wilfully causes loss or injury to another in a manner requires the assumption of risk, no person shall be responsible for those
21 that is contrary to morals, good customs or public policy shall events which could not be foreseen, or which, though foreseen, were
compensate the latter for the damage. inevitable. (1105a)
- Contractual breach committed in good / bad faith
DEFINITION
o If there is no bad faith, the liability for damages is limited to the
natural and probable consequences of the breach and which the - Any extraordinary event which cannot be foreseen, or though foreseen, is
parties had foreseen or could have foreseen. Thus, no moral and inevitable.
exemplary damages. - An event which is impossible to foresee or impossible to avoid.
- On moral damages - Happens independent of the will of the obligor.
o Not punitive - As opposed to force majeure
o Must be proportional to an in approximation of the suffering inflicted o Acts of man – independent of the will of obligor but not of others
with the factual basis satisfactorily proved. o Acts of god – totally independent of the will of every human being
- Code of Commerce provisions o But in our law, they are the same in so far as the exempt an obligor
Art. The ship agent shall also be civilly liable for the indemnities in favor from liability.
587 of third persons which may arise from the conduct of the captain
in the care of goods which he loaded on the vessel; but he may KINDS
exempt himself therefrom by abandoning the vessel with all the 1. Ordinary – those events which are common and could be reasonably
equipments and the freight it may have earned during the foreseen
voyage. 2. Extraordinary – uncommon and could not be
Art. The co-owners of a vessel shall be civilly liable in the proportion foreseen REQUISITES OF A FORTUITOUS EVENT
590 of their interests in the common fund for the results of the acts
of the captain referred to in Art. 587. 1. The event must be independent of the human will or at least of the
obligor’s will;
Art. The civil liability incurred by shipowners in the case prescribed 2. The event could not be foreseen (unforeseeable), or if it could be
837 in this section, shall be understood as limited to the value with all foreseen, must have been impossible to avoid (unavoidable);
the appurtenances and the freightage served during the
3. The event must be of such a character as to render it impossible for the
voyage.
obligor to comply with his obligation in a normal manner; and
Applies to limited liability in cases of collision only.
4. The obligor must be free from any participation in, or the
aggravation of the injury to the obligee.
 a. There must be no concurrent or previous negligence on the part SIMPLE LOAN OR MUTUUM
of the obligor.
- A contract whereby one of the parties delivers to another money or other
consumable thing, upon the condition that the same amount of the same
- An absence of any of the requisites would prevent the obligor from being
kind and quality shall be paid.
exempt from liability.
- It may be gratuitous or with a stipulation to pay interest.
- Impossibility of the performance must result from occurrence of
fortuitous event.
USURY
EXCEPTIONS TO THE EXEMPTION RULE - Contracting for or receiving interest in excess of the amount allowed by law
for the loan or use of money, goods, chattels, or credits.
1. When expressly specified by law
a. Obligor is guilty of fraud, delay, negligence, or contravenes the
tenor of the obligation KINDS OF INTEREST
b. Bad faith 1. Simple – rate is stipulated by parties
c. Debt proceeds from a criminal offense 2. Compound – when the interest earned is upon interest due
d. Thing is generic 3. Legal – presumed by law
2. When declared by stipulation 4. Lawful – interest is within the maximum allowed by usury law
3. When the nature of the obligation requires the assumption of risk 5. Unlawful – rate is beyond the law’s maxuimum

EFFECT WHERE RISK NOT ONE IMPOSSIBLE TO FORESEE RULES OF INTEREST

- If foreseen, then it can be said that the nature of the obligation is such - Legal Rate
that a party could be deemed to have assumed it. o 12% (from default until fully paid) if the transaction is a loan or
- Mere difficulty of foreseeing is different from impossibility to foresee. forbearance of money, goods, or credits or the judgment involves a
loan or forbearance of money, goods or credits, as prescribed in Central
EFFECT OF OBLIGOR’S NEGLIGENCE UPON HIS LIABILITY Bank Circular No. 416
o 6% for all others
1. Negligence contributed to the loss or damage
- Maximum Rate
a. In order that fortuitous event may release a debtor from his
o 12% per annum — if the loan is secured in whole or in part by a
obligation, it is necessary that he be free from previous
mortgage upon real estate with a Torrens Title or by any agreement
negligence or misconduct by which the loss or damage may
conveying such real estate (also registered) or an interest therein.
have been occasioned.
o 14% per annum — if the loan is not secured as provided above
2. Negligence not contributory to the loss or damage
o The rate prescribed by the Monetary Board of the Central Bank.
a. But where both fortuitous event and lack of due diligence are
present under conditions that the loss would have happened
with or without the negligence of the obligor, it cannot be MONETARY INTEREST v. COMPENSATORY INTEREST
said that responsibility arises therefrom Monetary Compensatory
Interest fixed by the parties to a It is imposed by law or by courts as
contract for the ease or penalty or indemnity for damages
ARTICLE 1175. Usurious transactions shall be governed by special laws. (n) forbearance of money

- Requisites for recovery of monetary interest

 1. Payment of interest must be expressly stipulated WHEN ART. 1176 DOES NOT APPLY
2. Agreement must be in writing
1. With reservation as to interest - Article 1176 do not arise where
3. Interest must be lawful there is a reservation as to interest or prior installments. The
reservation may be made in writing or verbally.
LIABILITY FOR LEGAL INTEREST 2. Receipt for a part of principal - the first paragraph of Article 1176
1. For loan or forbearance of money, the rate of interest due is that only applies to the receipt of the last installment of the entire capital,
stipulated; otherwise, 12% per annum computed from judicial or not to a mere fraction thereof.
extrajudicial demand until fully paid. Interest due shall earn legal 3. Receipt without indication of particular installment paid - the
interest (compound interest) from the time it is judicially demanded. presumption in paragraph 2, Article 1176 is not applicable if the
2. For other than loan or forbearance of money, the interest shall be receipt does not recite that it was issued for a particular installment
6% as indemnity at the discretion of the court. When the amount of due as when the receipt is only dated
the obligation is reasonably established, the interest shall run from 4. Payment of taxes
judicial or extra-judicial demand; otherwise, from the time the amount is 5. Non-payment proven
finally adjudged.
3. Where a judgment awarding a sum of money under (a) or (b) above,
has become final and executory, the legal rate of interest shall be 12% ARTICLE 1177. The creditors, after having pursued the property in
from such finality, based on the adjudged principal and unpaid interest, possession of the debtor to satisfy their claims, may exercise all the rights
until full satisfaction. and bring all the actions of the latter for the same purpose, save those which
are inherent in his person; they may also impugn the acts which the debtor
may have done to defraud them. (1111)
ARTICLE 1176. The receipt of the principal by the creditor, without
reservation with respect to the interest, shall give rise to the presumption that CREDITORS’ REMEDIES FOR THE SATISFACTION OF THEIR CLAIMS
said interest has been paid. 1. Exact fulfillment with the right to damages (specific performance)
2. Pursue the leviable property of debtor
The receipt of a later installment of a debt without reservation as to prior 3. “After having pursued the property in possession of the debtor,’’
installments, shall likewise raise the presumption that such installments have exercise all the rights (like the right to redeem) and bring all the actions
been paid. (1110a) of the debtor (like the right to collect from the debtor of his debtor)
4. Ask the court to rescind or impugn acts or contacts which the debtor
did to defraud the creditor when he cannot in any other manner recover
PRESUMPTION his claim
- The inference of act not actually known arising from its usual connection - The debtor is liable with all his property, present and future, for the
with another which is known or proved. fulfillment of his obligations, subject to the exemptions provided by law.
- Kinds
o Conclusive – cannot be contradicted
o Disputable / rebuttable – can be contradicted by presenting proof to
the contrary ARTICLE 1178. Subject to the laws, all rights acquired in virtue of an
obligation are transmissible, if there has been no stipulation to the
contrary. (1112)
EXCEPTIONS TO ART. 1178
1. Prohibited by law
 a. By the contract of partnership, two or more persons bind
themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits among
themselves. (Art. 1767.)
b. By the contract of agency, a person binds himself to render
some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.
(Art. 1868.)
c. By the contract of commodatum, one of the parties delivers
to another something not consumable so that the latter may
use the same for a certain time and return it. Commodatum
is essentially gratuitous. (Art. 1933.)
2. Prohibited by stipulation